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How is the CPI a useful measure of inflation if it ignores the things people actually have to spend money on like housing and healthcare?
by pigeonhole123 5y ago
How is the CPI a useful measure of inflation if it ignores the things people actually have to spend money on like housing and healthcare?
- em500 5y agoIt wouldn't be, if it did that. Fortunately it doesn't ignore those. In the US CPI calculation, housing has around 42% weight, medical care around 9%. Source: https://www.bls.gov/cpi/tables/relative-importance/2020.htm https://www.bls.gov/cpi/tables/relative-importance/2020.htm
- pigeonhole123 5y agoI think this is only rent? Most people don’t want to rent their whole life in the US https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
- em500 5y agoIt uses actual rents for renters and owner-equivalent rents for owners. This does not assume at all that people want to rent their whole life. (The main assumption it relies on is that owners do not systematically understate what they think their own house could be rented for.)
- pigeonhole123 5y agoSo as long as the interest rates stay extremely low then this hold true?
- imtringued 5y agoYou don't pay for the house. You pay for the mortgage. The mortgage is accounted for in the CPI and man gets this tiring. The housing component of the CPI has always been 3% for decades. It's one of the few things dragging it up to 2%. If you have a higher interest mortgage the value of the house goes down but you still have the same monthly payment.